Apple targeting $600, Facebook $70?

Tom Lloyd worked in marketing for the specialist firm Adler Coleman, the
fundamental research firm Woolcott Research, the institutional broker Hoenig &
Co. and the registered investment adviser Koenig Advisers. Currently he markets
services such as StockpickerUSA.com to institutional
investors. He can be reached at
tomklloyd@verizon.net. Tom has an MBA in accounting. His articles have been
published in Technical Analysis of Stocks and Commodities Magazine and
SeekingAlpha.com. you can follow Tom on Twitter at
@tomlloyd12.

How high are Apple and Facebook going on these positive earnings? My trading target for Apple is the consensus analyst 12-month target around $600. Facebook is a somewhat easier call using technical analysis targeting a retest of the recent high of $72.59. The analyst consensus is near $75.(As I write, AAPL is at $567, and FB is at $63.60 in after-hours trading.)

When will they reach these targets if ever? That is anyone's guess. My thesis on Apple
AAPL, -0.11%
is that nothing has really changed, except for the presence of Icahn forcing the board and management to do what they are supposed to be doing. It is working. See the increased dividend, increased buyback, increased sales and earnings and finally a stock split. Voila!

However, Apple as a growth stock is still dead in the water. It remains a value stock, milking the iPhone for all it is worth; Promising future new products; Promising improved margins; No promises about future growth. Apple has become a value/dividend stock with a low P/E, and the market discounted that change a long time ago by taking price down. If there is another new product like the iPad or iPhone that could change everything. But what we are hearing about is a bigger iPhone and some new products. Nothing on what they will do about the drop in iPad sales.

For trading purposes, I expect a pop on Thursday and then some profit taking. I would be surprised if price goes straight up to $600 before pulling back. Typically when price approaches the 12-month consensus, it is overbought and pulls back to test support as the profit taking sets in. With regard to the split, price usually runs up before a split and falls after it, so it’s possible AAPL trades at $600 just before it happens. As a small investor, I will wait for that weakness after the split to buy, or wait to see the new product announcements going into next Christmas. After all, AAPL is a retail stock, and holiday buying is the moon that attracts AAPL's price higher before the holidays.

Facebook
FB, -0.52%
is at the opposite end of the spectrum being an aggressive high-growth stock and is very overvalued. Any major pullback in the market and the growth premium in price will be slashed, as FB drops worse than the index. Meanwhile, the market is still an aging bull taking prices higher, and there is little to stop FB from trading higher to test resistance at its old high. Zuckerberg seems to be another Jobs.

I use two service that evaluate AAPL based on fundamentals and technicals, and you can ttake a look at their pre-earnings reports. ChaikinAnalytics.com using 20 mostly fundamental and some technical factors rated it "neutral" with weak technicals and underperforming the market. StockPickerUSA.com, a bottom-fishing fundamental program with some technicals rated it a five-star buy before earnings.

Likewise, we have the same reports available for FB. As you can see, Chaikin's Power Gauge Rating at the bottom of the chart recently improved from red to yellow or bearish to neutral. Notice that the technicals are classified as "weak." StockPickerUSA on the other hand has it rated as a weak, three-star buy. The valuation grid is 7.1 which means it is overvalued with good forecast earnings.

I look for both AAPL and FB to trade higher, reaching for $600 and $70 eventually. Just one man's opinion based on technicals and fundamentals, which we know can sometimes be wrong.

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